Writing about random topics

Markets update

On this blog, I used to post a lot about the stock market. This is because at the time, I was doing a lot of stock research and I enjoyed putting my thoughts down on cyber-paper. I’ve been writing about the market since I first started trading in 2004. Below is a chart of the SP-500:

The market is in a clear downtrend, but it looks like it may be bottoming. But I digress, the reason I haven’t been posting about the market is because I haven’t been in the market since September and actively trading since early 2008. In trading, I have three goals:

Protect capital.

Consistently make money.

Hit the occasional home run.

That first bullet point is the most important one. I have (had) fairly tight stops and I get out of the stock when it goes against me too far. But not only that, the current market is very difficult to make money in for me.

Back when I did piles of research, I made some calculations. During bull markets, the market is up 60% of the time and down 40% of the time. During bear markets, the reverse is not true. The market is up 45% of the time and down 55% of the time. In other words, the market is choppier and less predictable. It is much easier to make money during a bull market because the historical patterns work better. In bear markets, they don’t work as well and getting into positions is more difficult in terms of timing and the jerky market motions shake me out.

Worse still, the current market is extremely volatile. The market moved 15% in two weeks. It used to be unusual to move 15% in a year. Furthermore, 5% swings are not unusual these days and violent contramovements are the norm. The market doesn’t trend very nicely and whipsaws are to be expected. The market is not conforming to historical market conditions and therefore any research I may have done in the past to make money in a bear market is not reliable.

Thus, the volatility and unpredictability of the current market environment makes it too difficult for me to achieve goal number 1. Thus, I have opted to stay out of the market until stops acting crazy.